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India’s strategy to boost Export of Defence Equipments upto $2 Billion by 2019

Indian defence exports will touch $2 billion – six times the current export of defence equipments – by 2019, Defence Minister Manohar Parrikar said at the Defence Research and Development Organization. The value of defence export by DPSUs, OFB and the Private Sector Companies, for the financial year 2015-16 was Rs. 1693.80 crore as compared to Rs. 994.04 crore during the financial year 2014-15, according to DDP. The trend in export shows phenomenal growth by the industry.

However, growth of exports is very small compared to China that has established itself as a world leader in arms manufacture. In 2011 to 2015, China’s arms imports fell 25 percent compared with the previous five year period, signaling a growing confidence in the country’s homegrown weaponry despite key areas of weakness, the Stockholm International Peace Research Institute (SIPRI) said in a report on global arms transfers. Chinese exports of major arms, which excludes most light weaponry, grew by 88 percent in 2011-2015 compared to the earlier five-year timeframe, SIPRI said. Most of China’s arms sales went to countries in Asia and Oceania, the report found, with Pakistan accounting for 35 percent, followed by Bangladesh and Myanmar.

For india, some of the major export destinations for defence products have been Algeria, Afghanistan, Israel, Ecuador, Russia, UK, Indonesia, Nepal, Oman, Romania, Belgium, Vietnam, Myanmar, South Korea and Sudan. The major defence items being exported are Personal Protective Items, Offshore Patrol Vessels ( OPVs), Spares for Radar, Cheetah Helicopters, Turbo Chargers and Batteries, Electronic Systems (EOPOD ALH System), and Light Engineering Mechanical Parts etc.

India has developed a lot of equipment and technologies but no one really applied their mind to export them,” the defence minister said. “The private sector has developed artillery guns and once need of the Indian Army is met, these can be exported.”

India is looking at countries like Mauritius, Bangladesh, Philippines, and Afghanistan to export defence equipment. The items that India is looking to export include bridging equipment, missiles, warships, Off-Shore Patrol Vessels (OPVs), Self Propelled Artillery Guns (SP Guns), the Defence Minister said adding that Oman is keen to import border fencing equipment from India.

The push in defence exports is accompanied by increased production of the Ordnance Factory Boards (OFB) and the Defence Public Sector Units (DPSU). In the last two years, production in the OFBs and DPSUs has shot up by over 25%. The export by private defence industry has shown accelerated growth. About 12-14 companies in the private sector have contributed to defence exports.

Government is also considering creation of DRDO commercial arm for commercialization / marketing of DRDO technologies / products and services. Some of the products being considered for export are LCA-Tejas, Akash SAM, BrahMos Cruise missiles, Radars and other small arms and ammunitions.  Livefist can confirm that BrahMos Corp. will for the interim take over commercial export processing duties for the DRDO, with the possibility of a separate entity being spun off down the line.

Exporting defence equipment will have diplomatic ramifications. For instance, Pakistan is unlikely to be happy with India exporting defence platforms to Afghanistan. Similarly, Indian-made warships and missiles in the Vietnamese armory are likely to unsettle Beijing.

India has moved a step closer to joining an international arms trade arrangement which is expected to boost military trade, having updated its guidelines for export of dual use items that have both military and civil applications. The SCOMET (special chemicals, organisms, materials, equipment and technologies) List of items has been amended, bringing in details that align it
with the international norm. This paves the way for India to join the international treaties, Wassenaar Arrangement and the
Australia Group, within a few months.

The updated list, which includes 16 broad categories of products that can be exported after clearance, is likely to boost military trade and make clearances easier for private companies pursuing export orders.”This amendment will ease the process for Indian companies to gain the necessary approvals for exports and be an enabling measure for India to achieve its ambitious
targets for defence exports,” said Ankur Gupta, vice president at EY.

The list included warships, tanks, armoured vehicles, ammunition, rifles and small arms, military training equipment,
electronic warfare devices, software, bombs and torpedoes.

The defence ministry relaxed earlier export control laws that required multiple end user certificates by Indian companies wishing to export components and parts of larger systems. The two things combined, experts said, will go a long way in boosting foreign trade for India’s private companies.

 

 

Indian Strategy for defence exports

The domestic defence industry would have limited scope for investment in R&D and production if it relies only on the domestic demand. There is a need to promote investment in the defence sector, both in R&D and production, thereby resulting in higher self-reliance and indigenization. While putting in place the policy framework and procedural mechanisms, the thrust would be on indigenous production and exploring possibilities of exports to other nations that may look forward to supplies from India, says DDP.

Since the defence technology needs long term investment, its obsolescence is high with low economies of scale. Hence, the policy of maximizing indigenous production without well supported R&D policy and export strategy may not bring desired results. Therefore, the defence industrial policy has to be supplemented by the strategy for defence exports without which the economic base of the defence industry would be difficult to sustain in the present economic competitive environment.

The strategy calls for specific export promotion/ facilitation body would be set up with participation from industry representatives. The role of the body would be to render advice to government on various export related issues, coordinate all export facilitation schemes of the government, increase awareness amongst the industry about various export facilitation measures and promotion of exports through specific marketing efforts in targeted countries.

The world over, defence exports are covered by the defence diplomacy between friendly countries. This also contributes to building local operational capabilities and, therefore, enhances inter-operability with our own forces, especially during UN peacekeeping missions. Wherever feasible and required, the industry delegations from public/ private sector/ JVs of private and public sector would be included in bilateral meetings/ discussions with various countries so that the importing country gets due comfort while importing from India.

Offset is an important mechanism available to the domestic industry to enhance export capability. The Offset Policy may be reviewed and aligned towards final integration of weapons/systems in India and promoting export of such systems from India. The Policy may also be reoriented towards acquisition of critical technologies required for high end weapons/platforms so that the same can be leveraged for export.

Online and Time Bound Clearance . A system of time-bound clearance for export permissions/ NOC would be introduced. A web based system would be developed to receive applications for NOC online and convey the NOC to the companies online.

References and resources also include:

http://www.huffingtonpost.in/2017/01/03/india-to-export-2-billion-usd-worth-of-defence-equipments-by-201/

https://thewire.in/68875/switching-strategy-lessons-china-indias-defence-industry/

http://economictimes.indiatimes.com/news/defence/india-moves-a-step-closer-to-joining-international-arms-trade-arrangement/articleshow/58831457.cms

 

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